CARGILL, INC.

, Petitioner,
vs.
INTRA STRATA ASSURANCE CORPORATION, Respondent.

G. R. No. 168266   March 15, 2010

FACTS:

Petitioner Cargill, Inc. is a corporation organized and existing under the laws of the
State of Delaware, United States of America. Petitioner and Northern Mindanao
Corporation (NMC) executed a contract dated 16 August 1989 whereby NMC agreed
to sell to petitioner 20,000 to 24,000 metric tons of molasses, to be delivered from 1
January to 30 June 1990 at the price of $44 per metric ton. The contract provides that
petitioner would open a Letter of Credit with the Bank of Philippine Islands. Under
the "red clause" of the Letter of Credit, NMC was permitted to draw up to $500,000
representing the minimum price of the contract upon presentation of some documents.

The contract was amended three times. The third amendment also required NMC to
put up a performance bond equivalent to $451,500, which represents the value of
10,500 metric tons of molasses computed at $43 per metric ton. The performance
bond was intended to guarantee NMC’s performance to deliver the molasses during
the prescribed shipment periods according to the terms of the amended contract. In
compliance with the terms of the third amendment of the contract, respondent Intra
Strata Assurance Corporation issued on 10 October 1990 a performance bond 6 in the
sum of ₱11,287,500 to guarantee NMC’s delivery of the 10,500 tons of molasses, and
a surety bond7 in the sum of ₱9,978,125 to guarantee the repayment of downpayment
as provided in the contract.

ISSUE:

Whether or not petitioner an unlicensed foreign corporation, has legal capacity to sue
before Philippine courts.

RULING:

No, Cargill has no legal capacity to sue before the Philippine courts.. Under Article
123 of the Corporation Code, a foreign corporation must first obtain a license and a
certificate from the appropriate government agency before it can transact business in
the Philippines. Where a foreign corporation does business in the Philippines without
the proper license, it cannot maintain any action or proceeding before Philippine
courts as provided under Section 133. Since respondent is relying on Section 133 of
the Corporation Code to bar petitioner from maintaining an action in Philippine
courts, respondent bears the burden of proving that petitioner’s business activities in
the Philippines were not just casual or occasional, but so systematic and regular as to
manifest continuity and permanence of activity to constitute doing business in the
Philippines. Since respondent is relying on Section 133 of the Corporation Code to
bar petitioner from maintaining an action in Philippine courts, respondent bears the
burden of proving that petitioner’s business activities in the Philippines were not just
casual or occasional, but so systematic and regular as to manifest continuity and
permanence of activity to constitute doing business in the Philippines. In this case, the
Court find that respondent failed to prove that petitioner’s activities in the Philippines
constitute doing business as would prevent it from bringing an action.